FSA paid £7.6m for secret RBS report

• FSA charged RBS a special levy of £4.7m
• Insists there was no evidence of dishonesty

Royal Bank of Scotland Chairman Tom McKillop and chief executive Fred Goodwin arrive for the RBS shareholders meeting in November 2008 when McKillop apologised to shareholders for bringing the bank to its knees Photograph: David Moir / Reuters/REUTERS

An analysis the Financial Services Authority ordered from accountants PricewaterhouseCoopers into what went wrong at Royal Bank of Scotland cost more than £7.6m, according to information provided to the Guardian.

The City watchdog, which is largely funded by City firms, did not pay the fees in their entirety as the Guardian can reveal that the regulator imposed a "special levy" on RBS of more than £4.7m for the extra regulation that the bailed out bank required after receiving a £45bn capital injection from the taxpayer.

Yet, despite having incurred such hefty fees, the FSA has admitted it does not have a report it can publish into the events that brought the Edinburgh based bank to the brink of collapse in October 2008, after announcing last month that "bad" decisions, not dishonesty, were to blame.

The FSA had initially refused to elaborate on why it had concluded that disciplinary action would not be taken against any of the individuals involved, including former RBS chief executive Sir Fred Goodwin. But after a fortnight of political pressure, FSA chairman Lord Turner has agreed to publish a report in March into the problems at the bank.

A freedom of information act request by the Guardian to obtain reports compiled by PwC was rejected by the FSA on the grounds that is unable to disclose "confidential information" under section 348 of the Financial Services and Markets Act.

The regulator used the same reason when it refused to publish more details last month but Turner has now pledged to write a report that can be presented to the board of RBS, led by chairman Sir Philip Hampton, and "some third parties" – most likely former board members, including Goodwin – whose approval will be sought to enable publication.

The FSA commissioned PwC to look at a number of operations at RBS, including the events that led to the takeover of the Dutch bank ABN Amro as the credit crunch was beginning in late 2007. The deal left the enlarged bank with wafer-thin capital ratios.

PwC also looked at rights issues conducted by the bank in 2008 that were required to bolster its capital as a result of the Dutch takeover. PwC also scrutinised the "conduct, systems and controls" of the investment bank at RBS and the regulator defended the cost of the work conducted by PwC on the basis that a "complex" set of investigations were essential.

A freedom of information act request to the FSA into the fee paid to PwC for its work led to the regulator disclosing that "the fee so far paid to PwC for its work on the review into RBS was £7,643,386 (including VAT)". "We expect to receive a final invoice for approximately £55,000 (excluding VAT) in January 2011," the FSA added.

RBS declined to comment but has said previously it will "engage constructively to facilitate publication of the report, subject to any necessary commercial restraints".

Only one former RBS banker – Johnny Cameron – has been named in any public statements by the FSA. He ran the investment bank at the time of the bank's problems and the regulator agreed not to pursue disciplinary action against him as long as he did not undertake full-time employment or have a "significant influence function". Cameron now has an advisory role at boutique bank Gleacher Shacklock.

The FSA has said the review by PwC concluded that "bad decisions were not the result of a lack of integrity by any individual and we did not identify any instances of fraud or dishonest activity by RBS senior individuals or a failure of governance on the part of the board".

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